The effect of demand uncertainty on the decisions and revenues in the two-class revenue management model
Author
Kocabiyikoglu, A.
Date
2015Source Title
İktisat İşletme ve Finans
Print ISSN
1300-610X
Publisher
Bilgesel Yayincilik San. ve Tic. Ltd.
Volume
30
Issue
347
Pages
95 - 120
Language
English
Type
ArticleItem Usage Stats
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Show full item recordAbstract
We explore the impact of changes in market conditions on optimal allocation decisions and revenues, within the standard two-class revenue management framework, using stochastic dominance relations. We show that an increase in market size leads to higher revenues, and the number of units allocated to the high-end class increases in its market size. The direction of the change in optimal allocation and revenues in response to changes in the variability of the high-end market depends on the relationship between the high and lowend prices. Our structural and numerical results suggest higher variability in the market is generally detrimental to revenues.